The federal government and
Qantas Airways
are working together on a final proposal that would assist the airline in levelling the playing field against rival
Virgin Australia Holdings
without guaranteeing all of its debt.

The proposal is believed to involve the provision of a standby debt facility with a government guarantee that Qantas could access for a fee. It is designed to help bolster the airline’s credit rating and it could lessen the need for the airline to sell key assets such as a stake in its frequent flyer program. But it would not offer a guarantee on Qantas’s existing $6 billion of on-balance sheet debt.

The assistance would be made in the recognition that taking action to truly level the playing field by lifting foreign ownership restrictions on Qantas would take months at best and may not happen due to opposition from Labor and the Greens. Air New Zealand, Singapore Airlines and Etihad Airways own 67 per cent of Virgin.

A Qantas spokesman said the airline was in continued dialogue with the government about how to level the playing field but was not in a position to comment beyond that. “Regardless of our discussions, we are getting on with the work of transforming our business in the face of broader pressures in the domestic and international aviation markets," the spokesman said.

Chief executive
Alan Joyce
, chief financial officer
Gareth Evans
, Qantas Domestic head
Lyell Strambi
and Qantas International head
Simon Hickey
are due to meet with union leaders representing the airline’s more than 30,000 employees on Wednesday.

Ahead of the meeting, the Transport Workers Union issued a four-point plan to help improve business conditions in aviation without removing foreign ownership restrictions on Qantas.

The plan calls for accelerated depreciation of aircraft, tax changes to stop Jetstar flying domestic flights with foreign crews, replacing existing aviation awards with a single industry award for workers in the same occupations and federal regulation ensuring employees of foreign airlines were given Australian wages, conditions and rights when using local airspace and facilities.

Burden shifted to taxpayers

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TWU national secretary
Tony Sheldon
argued those measures were better than a debt guarantee, which he said simply “shifts the burden of poor Qantas decisions from its shareholders to Australia’s taxpayers". If the government lent Qantas its AAA rating, even for a fee, taxpayers would ultimately be liable for the standby facility. But it is possible Qantas will never draw on it.

The timing of any decision by the government on a standby debt facility remains unclear, as is the size of the loan. Cabinet met on Monday but Qantas was not on the agenda.

The airline, which lost its investment grade credit rating from Standard & Poor’s this month, would like assistance as soon as possible but immediate action could prove difficult over the Christmas and New Year period.

Mr Sheldon has urged the Qantas management team to woo politicians and the community by devising a strategy of success. “The really important question is, has it got a strategic plan that doesn’t involve the company’s brand being sweated further?"he said.

Qantas expects to update the market on a strategic review, which could include asset sales, by the time of its half-year results in February.

The meeting with unions on Wednesday had been planned before Qantas this month unveiled plans to slash 1000 jobs and cut $2 billion of spending over three years in response to an expected half-year loss before tax of up to $300 million.

The meeting will be attended by senior representatives from TWU, Australian Services Union, Australian Council of Trade Unions, Australian Workers’ Union, Australian & International Pilots Association and Flight Attendants Association of Australia. The discussion is expected to focus on the job losses and cost cutting as well as the other challenges faced by the airline.

Ahead of the meeting, ASU national secretary
Linda White
said she believed government intervention to assist Qantas was not unreasonable. “Anyone who thinks aviation is a level playing field is talking through their hat," she said. “Australia has the most liberal aviation regime in the world.

Ms White said she would be seeking more details for her members, which comprise around one-third of the workforce, on potential job cuts. To date, the only job losses included in the 1000 are 300 engineers at Qantas’s Avalon heavy maintenance base.